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Sunday, August 3, 2008

The rich get richer

One of the saddest aspects of eight years of the collective insanity of Bushdom has been the widening financial gap between the rich and everyone else. Here's a study that shows the nation's income inequality to be the worst it's been since 1928. This is one of many parallels we now see between the present day and the eve of the Great Depression.

Do you think the situation would get any better under John McCain, who crows at every opportunity about extending Bush's tax and economic programs?

Cripes, folks...That graph only elucidates what percentage of household income accrues to the top 1% in the US, not the percentage of wealth held by the top 1%. That number has got to be higher than ~20%.

I'd say we need to be looking for "capitalism with a human face." The latest in theories surrounding the inevitable fall of massive empires is that it happens when the elites separate themselves from the rest of society and then, when the shot hits the fan, they just stand aside.

When there is no cooperation from those on the lower income scales, because they've always been screwed by their own elite....they'll fed them to the new elite that comes to take it away from them.

Robert Canfield wrote:
> What's difference does it make
> to the poorer folks if the rich
> are richer? Class envy? Jealous?
> Resentful? I don't understand the point > you're trying to make.

How do you think the rich are getting richer -- they've suddenly started working harder, 12 hours a day instead of 11? No, it's because the companies they own are cutting back on health benefits, retirement benefits, and income. That doesn't just make them richer, it makes everyone else poorer. Money for the tax cuts for the rich and to fight corporate America's wars comes from the middle and lower classes. They benefit, everyone else loses. On the mortgage mess, the government is bailing out Wall Street, not Main Street. They get richer, we all get poorer, not only because we have to pay for the bailout, but we don't get bailed out ourselves.

A very large social security surplus was in essence paid out to the wealthiest in the form of income tax cuts. Taking money from the lower classes through payroll taxes, and doling it out to the very rich, and at the same time ensuring that social security will cross over into negative cash flow sooner than it otherwise would have.

The rich get richer NOT by, as some people allege here, taking it away from poor people. They get richer by CREATING wealth. Economics is not a zero sum game.

Google. Microsoft. AOL. E-Bay. How about Willam Adelson, #5 on Forbes billionaire list-
"Son of a Boston cabdriver borrowed $200 from his uncle to sell newspapers at age 12. Made first fortune in trade shows. Created computer industry's premier show, Comdex, mid-1980s; ran 70% profit margin renting space for 15 cents a square foot and leasing it to exhibitors for up to $40 a square foot. Sold show to Japan's Softbank for $862 million in 1995."

This guy didn't take money from anyone unwillingly. He sold products and companies to willing sellers. He created new wealth.

This college drop-out and his buddy created the Google search engine and more. They didn't force money from anyone. They created a product, and willing sellers gladly pay for it. Larry Page and his Google buddies created NEW wealth.

I could go on and on. The road to riches is found by creating goods and services people want to buy. The zero sum theory of economics is only supported by socialists, who rely on their failed theory to prop up the rest of their class envy song and dance.

Councilor Canfield must have hit the nail on the head. The richest amongst us are just way smarter and like, way, better people than the rest of the populace. Poor people are just like totally poor cause of their own issues. Trade policies, economic development, education, energy, health care, discrimination, repression, sweatshops, housing, tax structures, codes, wars and stuff don't have much to do with that. As if.

How much is too much CEO compensation? Who decides? What if political party "X" assumed control of Congress, and they decide that tax law professors make too much money? Who decides how much is "too much"? Whoever controls Congress? No thanks.

Jack, you deserve as much compensation as you can persuade your school to pay you. If you ask for $1 billion in compensation and your employer is stupid enough to agree to your terms, you deserve the money!

That's a sad "value" "system." If your compensation is set by a board of directors that you handpick, and on whom you bestow all sorts of inside information, handsome fees, and other favors, that's called corruption. All of you are stealing from shareholders, and arguably from other employees.

One way to take care of this is to institute a confiscatory income tax rate on income above, say, $2 million a year. We had such a system for many years -- many very prosperous years.

You trust the CEO class more than you trust the government? How foolish of you.

I think this trend may also be in force in other countries as well. I remember reading in the book, Fooled by Randomness, globalization has led to individual discovery, talent and skill being rewarded much more so than in the past. Unique talents like that of Michael Jordan are rewarded much more so than in past years. So, I don't think it necessarily tax policy. The top 1% still pay a chunk of all taxes paid in the U.S. The 1986 tax "simplification" legislation actually closed a lot of loop holes that used to be used to offset high marginal tax rates.

Joe Public tends to put up with one scheme or the other for a while, but definitely recoils at the extremes. I would suggest that the current swing towards the Dems suggests the public is definitely aware that the boundaries are being pushed.

Even my first thought looking at that graph was that the last 28 years have been pretty good economically, given such an increase in global population.

Kudos to Robert Canfield. Thanks for adding a strong dose of logic to the discussion.

In our current political climate, the greedy poor take every advantage to manipulate their world to gratify their greed. It is no different than the greedy rich. Unfortunately, fewer and fewer people take a strong stand against the inherent "sin" of these actions. Rich or poor. Poor or rich. Both groups ultimately pay a very high price for their actions.

Now the question I present is, "Will we experience a tipping point where the rich and poor equally distrust the other to the point that we loose the ability to equally dispense justice?" I hope not.

Robert Canfield: The rich get richer NOT by, as some people allege here, taking it away from poor people. They get richer by CREATING wealth. Economics is not a zero sum game.

That's a myth that the right repeats again and again, unsupported by the facts. All you have to do is look at GDP relative to corporate CEO salaries over the past 20-30 years to see how far out of whack things have gotten. Even a conservative bastion like Business Week has admitted that this is true.

The greedy poor? What planet are you living on? The poor don't have enough political power to manipulate anyone.

I don't think people understand the all the motivations welfare and other social programs. Of course, there is the humane aspect. However, it's also true that hungry, hopeless people are dangerous to the status quo. When people have nothing, they have nothing to lose. As much as some of you might want to live in the Ayn Rand dreamworld (which never has and never will exist), having a safety net is necessary for the protection of capitalism.

Robert Canfield, undoubtably a few people do get rich by creating something novel and needed. The vast majority do not. They get rich by inherited wealth, by the run-up in the stocks they own, which are running up because corporate profits are running up, both because they cut back on health and retirement benefits, move overseas, etc. and because corporations control the US government. In turn the US government gives them massive subsidies, bails them out when they fail, passes favorable legislation such as recent changes to credit cards, smooths deals with overseas nations, wages war to acquire resources, and so on and so on and so on. For every Sergey Brin, there are 50 Paris Hiltons. For every Joseph Kennedy, there are a hundred cousins hanging-on.

Boy, really? Why is the "party of the poor" in control of Congress? Is it because the majority feels so badly for the poor that they vote D to continue the hugely successful "War on Poverty" begun over 40 years ago?

The ignorance about economics on this blog is absolutely shocking. I'd love to see a graph of how the poor have done since 1913 - especially if it included metrics like "color televisions owned," "number of cars owned," "internet service provider used," etc. My mother lived through the Depression - "advocates" for the poor don't have any idea what they're talking about.

"One way to take care of this is to institute a confiscatory income tax rate on income above, say, $2 million a year. We had such a system for many years -- many very prosperous years."

Gee, Jack...how about we start the confiscatory tax rates even lower...say at about $75k a year. That way people like you could pay them. What do you think of that? Or do you only like confiscatory tax rates that OTHER people pay?

$2 million is sure a handsome sum of yearly income, but what gives you -- or anyone -- the "right" to decide how much wealth can be produced, and who may profit from it?

You are not worse off because there are more people with more money. You're just more conscious, in part because of the media, that other people have 'way more than you do. Since you think of yourself as one of the "intellectual elite" it probably bothers you that these people have more money than you do, especially since you don't view them as being as "worthy" of it as you are. So instead of figuring out how to earn more, you're part of the class that wants to figure out how to take it away from others, not because you'll actually be better off, but because then you won't have to feel bad. Hardly noble motivations, and ultimately fruitless. The rich and smart will always find ways to make money.

Funny how some make this argument so left vs. right. And I'm not a big fan of Jonah Goldberg, but his column this morning makes some interesting points. One being: ". . . the children of capitalism still whine."

What's missing here is that the top 1% earners ($388,000+) pay 40% of all individual income taxes. The top 10% ($109,000+) pay 70% and the top 50% pay 97.1%. These figures are from tax year 2006. What this shows is that the bottom 50% of all earners are a bunch of flakes who contribute nothing. So to you tax the rich folks, you already are, they're paying it all now.

For those still deluded by trickle down, what are the oil giants doing with their excess income? Increasing refining capacity? No. Hiring more labor? No. Exploring more mineral leases? No.
In their infinite concern about the economy, they are buying back their own stock. A slick way of expending retained earnings on themselves.

genop,
Trickled down is unavoidable. So is trickle sideways and trickle up.

No matter what income level one is, having more enables you to spend more.

A tax cut for the wealthy results in all sorts of things that benefit the middle and low income earners. Expanded business, increased purchases of products built, sold and distributed by less income labor.

Tax cuts for the moderate and less eaners results in additional purchases as well which beneifts Walmart, the wealthy and stock holders.

It's all quite unavoidable.

The more money out of the hands of government and left "moving" throughout the economy benfits every one.

Isn't having more and more people develope great wealth exactly what we want?
As far as the poor goes there will always be poor who are either lacking any ability to imporve or they are just starting out on their way to being middle, upper or top earners.

So what satifies the left?

Robinhood policies or just restrict the earnings of the wealthy so others won't have to suffer with jealousy?

The rich (however you define them) pay almost all income taxes, most property tax, much of the payroll tax, etc. What exactly else do you want from them? The rich already provide the funding that the rest of society enjoys, what else is there to give? If you enact policies to destroy the rich then who is going to pay for all of the streetcars?

The problem with share buy-back is the lack of investment in alternative energy resources. According to author Michael Brush:
"While many Americans struggle to fill their gas tanks, big U.S. oil companies are making so much money that they literally don't know what to do with it."
"Instead of reinvesting more of their newfound wealth to increase supplies or develop emerging technologies that might one day reduce energy costs, they are giving much of the loot to shareholders already enjoying outsized gains."
I call that trickle up, not down. If your one of the fortunate few invested, then you enjoy your gain at the expense of a solution to the problem of high gas prices and inflation for all the rest of us.

Nothing stopping you from calling the broker and buying stock in Exxon if you want. If you're so convinced those stockholders are getting rich then take all of your money and buy stock. Borrow some money, use it to buy on margin and make a killing.

The problem with share buy-back is the lack of investment in alternative energy resources.

Are they obligated to invest in alternative energy resources? If they bought back stock from you, you are free to take your money and put it in companies that produce technologies for altenative enrgy.

United purpose, Justice, Domestic Tranquility, improving General Welfare, providing ourself for our Common Defense, oh, and maintaining an habitable planet for ourselves and our posterity. Same old same old.

A corporation is not a person. A person cannot possess, or privately 'own' the air, the water, NOR the land ... nor the natural resources therein. This land is your land, this land is my land -- the rich raped our mother, Earth.

"... a confiscatory tax ..." Maybe as a secondary or lower priority measure. First, downsize the 'nationalism.' The biggest problem is 'national' figures are out of reach, remote from the locals and the local area -- out of sight and no adult supervision to mind them. Just turn 50 States into 50 'nations.' Kick the props out from under the absentee so-called 'representatives.'

Oregonians (for example) take care of themselves, Virginians (for example) take care of themselves. Any feuds get aired and settled at the U.N.

CAPIIBARY, Paraguay (AP) - Just outside the rickety wire fence that guards the rich, red soil of this vast hacienda, dozens of peasants have camped for weeks under a patchwork of thatched shelters and tarpaulin-covered tents.
They are demanding a slice of the wealthy landowner's property to grow food for their families. And if Paraguay president-elect Fernando Lugo doesn't help them get it, they plan to swarm the private property, just as thousands of other landless farmers have done throughout the country.

"The Paraguayan people are awakening," said Salomon Ruiz Diaz, 29, a protest leader.
Land reform is the single biggest issue ....

The poor do NOT "get" to 'possess' the land ('handed over' or otherwise), any more than the 'non-poor' do not 'own' it. Think: lifelong 'lease' of land, with swap rights, on conditions (community-set), such as occupying and maintaining the 'property' and with preferential rights of bequest to family (or others) on the same conditions -- approximately 'tenant at will' -- if they occupy and maintain, etc.

Stubbornly mindset on 'freezing' time and the status quo, when all is always changing and nothing is certain except change, makes one obsolete and obnoxious. Roadkill on the highway of Time. First rule: When you are in a hole and things are not working, then stop digging and creatively think of ways to move out and move forward.

I don't generally lift my media criticism opinions from Variety, but I do like their headlines, and this story, "Rupe's paper chase: Wise or wacky?" arguing that Murdoch has yet to destroy those aspects of The Wall Street Journal that make it a great newspaper, is undeniably true.

Evidence of that greatness appears in this page-one story ($) titled, "Companies Tap Pension Plans To Fund Executive Benefits: Little-Known Move Uses Tax Break Meant For Rank and File" by Ellen. E. Schultz and Theo Francis, [WSJ], which ought to be a key issue in the campaign, as it illustrates the consequences of unfettered capitalism during a time when things are going bad. The top 10 percent of Americans enjoyed virtually all the gains from the recent run-up in the economy, and now they are throwing the workers overboard when things turn sour.

"Generally, only the executives are aware this is being done. Benefits consultants have advised companies to keep quiet to avoid an employee backlash."

This is exactly the kind of story that we will lose once we lose most of our great newspapers. Where is the profit in it?

On the other hand, Ezra's right again, here. The Politico is a financial failure; seems like the only good business idea so far regarding journalism is, sadly, to refuse to pay for it.

And speaking of ABC News, everyone's talking about Glenn Greenwald's piece in Salon, here. (Though when I say "everyone," I should note that I've not heard anything about it from ABC News ...)

If big oil isn't willing to funnel any of it's windfall toward R&D, labor, or infrastructure expansion in deference to it's shareholders, then at best this is sideways trickle, but feels more like a golden shower.
About the time I invest in energy stocks, the bottom would drop out and I'd be asked to turn out the light when I leave.

A very large social security surplus was in essence paid out to the wealthiest in the form of income tax cuts. Taking money from the lower classes through payroll taxes, and doling it out to the very rich, and at the same time ensuring that social security will cross over into negative cash flow sooner than it otherwise would have.

BTW, the rich put a sizable percentage of their tax cuts into the Treasury securities that were issued to fund the deficit that their tax breaks helped create. This way, they not only get a yearly windfall from the tax breaks; they get interest income (that working people have to pay for) on their investments in government securities.

Link sees it at AdBusters.ORG, with comments, (e.g., "Noam has long been advocating putting our efforts into our communities instead of looking to Washington for guidance. With the energy crash on the horizon, I'm both scared and excited to watch this inevitable transition. The chapter of consumerism is closing, and I will suffer through the withdrawal like anyone else.")

There is so much to respond to here, but let's just focus on Jack's suggestion that incomes (presumably of individuals)above $2 million be taxed basically at 100%. Are you serious Jack? Are you seriously suggesting that you would tax any individual's adjusted gross income above $2 million at 100%? So, if I have a large amount of investable funds, I can only earn $2 million per year in income or capital gains? Well, I'm certainly not going to put any of that money at risk of loss beyond the $2 million income threshold. Forget about venture capital investments, or any equity investments, or even loans, if you're really imposing a $2 million income cap. Every other investable dollar goes into the mattress (great news for Sleep Country USA and Mattress World) or maybe Singapore. You will succeed in shutting down access to capital in the United States far faster than anything Bush or Greenspan or Brenanke could ever come up with.

Road Work

Miles run year to date: 113
At this date last year: 155
Total run in 2016: 155
In 2015: 271
In 2014: 401
In 2013: 257
In 2012: 129
In 2011: 113
In 2010: 125
In 2009: 67
In 2008: 28
In 2007: 113
In 2006: 100
In 2005: 149
In 2004: 204
In 2003: 269